by Giuseppe Gagliano –
The European Commission’s proposed ban on Russian diamond imports comes amid broader sanctions against Russia following its invasion of Ukraine. Belgian Prime Minister Alexander de Croo announced such a ban for G7 members on September 19, 2023. Russia, the world’s third-largest diamond producer, derives around $4.5 billion a year from this sector. The United States, New Zealand, the United Kingdom and Canada have already imposed sanctions on gemstones mined by Alrosa, a major Russian mining company.
This move aims to limit funds that could fuel the conflict in Ukraine, but raises questions about its effectiveness. The Kimberley Process, which has existed for years, aims to prevent trade in conflict diamonds, but this new embargo specifically targets Russia rather than a conflict zone. This strategy could not only miss the desired target, but also damage Antwerp, a major diamond trading center.
Sanctions could also shift trade to less regulated markets, such as Dubai or Surat, India. Antwerp fears losing its dominant position in the global diamond trade to these locations. Additionally, sanctions on Russian diamonds could impact the polishing business in Surat, which works with many Russian gems.
This is not the first attempt to sanction Russia; Previous restrictions on Russian oil have led to higher fuel prices in Europe, while Russia has found ways to circumvent sanctions, increasing oil exports to China and India.
Major competitors in the diamond industry, such as De Beers and Rio Tinto, could benefit from the embargo, but are concerned about calls for greater transparency and control. Traceability of diamonds remains a significant challenge due to the confidential and unique nature of the diamond trade.
Finally, it is uncertain whether the European embargo on Russian diamonds will achieve its goal. Alrosa could find other markets for its stones, further complicating traceability. Technologies like blockchain could offer a solution, but their effectiveness remains to be seen. Meanwhile, the diamond market continues to be unstable.
